BSP sees December inflation at 2.2-3%

Inflation is expected to remain below target by the end of the year even as the rate of increase in the prices of basic goods may jump to another high in December amid the Christmas holiday.

In a text message to reporters Friday, Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. said they expected inflation this month to be within the 2.2-3 percent range.

The high end of the BSP’s forecast for December was faster than the 2.5 percent year-on-year increase in headline inflation in November, the highest since December 2014’s 2.7 percent and the same as the rate in February last year.

Despite inflation picking up in the last two months of the year, Tetangco said the full-year average inflation was “likely to settle slightly below the low end of the 2-4 percent target range in 2016.” The end-November average stood at 1.7 percent.

Last year, inflation averaged 1.4 percent, also below the government’s 2-4 percent target.

Tetangco last week announced that the annual inflation target for 2017-2020 was still 2-4 percent.

For the month of December, the BSP expects upside pressures from reported increases in the prices of oil products, rice, as well as power rates in Meralco-serviced areas, Tetangco said.

The weaker peso would also generate inflation pressures, the BSP chief added.

Lower LPG prices would nonetheless partially offset upward price pressures this month, according to Tetangco.

Last week, BSP Deputy Governor Diwa C. Guinigundo said the BSP’s inflation forecast for 2016 had been kept at 1.8

percent.

But for 2017 and 2018, Guinigundo said the BSP’s inflation forecasts were raised to 3.3 percent and 3 percent, respectively, from 3 percent and 2.9 percent previously.

Guinigundo said faster-than-expected inflation in November, rising oil prices, the impact of the sustained strong domestic economy, as well as the depreciation of the peso by about 5 percent year-to-date were expected to bring about faster inflation in the next two years.

As for 2019-2020, Guinigundo said they expect “inflationary trends to continue because the economy has become competitive” alongside expectations that oil prices would normalize as supply continues to outstrip demand.